Moody’s took rating action on the Russian subsidiary of OTP Bank, Hungary’s largest commercial lender, due to its “asset quality deterioration” and its first-half losses, a consequence of growing credit costs.
“The rating action reflects Moody’s expectation that the bank’s asset quality might deteriorate further over the next 12-18 months, putting pressure on the bank’s profitability; and pressure on the bank’s capitalization will develop because additional provisioning charges will persist,” the ratings agency said.
The negative outlook on OTP Bank Russia’s long-term ratings could become stable again if the bank improves its profitability and asset quality metrics, as well as maintains adequate capital levels, Moody’s noted. Possible negative impacts on the rating include continued loss-making performance caused by further asset quality erosion, a further deterioration in the bank’s capitalization or a downgrade of parent OTP Bank, the Service added.
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